Qimonda puts production to sleep

MUNICH, Germany  Qimonda AG has said that talks to sell the business will be extended beyond the end of March if necessary, but meanwhile the company has decided to cease DRAM production. In addition, the future of Qimonda is being reconsidered within the highest ranks of the European Commission.

According to the company, the negotiations have not yet yielded tangible success, but they also have not been terminated. However, since it is now foreseeable that no contract with an investor will have been signed before the end of March, the company has decided to ramp down the production, which had already been reduced to 25 percent of capacity. "We have not pulled the plug, we just went to standby-mode," a spokesperson explained.

Qimonda's workers are now being paid by a state aid scheme according to German insolvency law. The period for this aid only lasts up until the end of March; afterwards Qimonda would have again to pay the workers in full. This has been ruled out by the memory maker, since there simply is not enough cash available.

This is one reason production is being put into standby mode and workers at Qimonda's German sites will be reassigned to a transfer company. If the insolvency administrator Michael Jaffé finds an investor, the staff can be reassigned again; thereby avoiding layoffs.

In the meantime, the Qimonda case has arrived at the highest ranks within the European Community. Friday (March 13), the Saxon Prime Minister Stanislaw Tillich met the president of the European Commission, José Manuel Barroso in order to discuss EC aid for Qimonda.

According to a statement from the Saxon state government, Tillich said that he had the impression Barroso understood the urgency of the problem. "In Barroso, we have an important advocate who is aware of the importance of microelectronics for Europe's industry," was reported to have said in the statement.

According to Tillich, Barroso wants to assess the possibility of using EC aid to restructure Qimonda. Tillich added that the Saxon government is willing to assist Qimonda under the condition that an investor can provide a "mortgageable business plan."

Observers noted that Barroso's willingness to provide a financial frame is not to be confused with tangible cash flow and referred to an earlier problem when the Saxon state government had, in December 2008, promised to provide aid but the money got stuck in the bureaucratic process. "I only believe in state aid when the money has arrived in Qimonda's account," he said.